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$mart Money: Finance and the growing family

With my busy summer travel schedule, I asked my colleague Niko Lin to prepare some material for this week's column. Niko recently resumed her career after a maternity leave, and is managing the challenges of balancing work and family life. She says..

With my busy summer travel schedule, I asked my colleague Niko Lin to prepare some material for this week's column. Niko recently resumed her career after a maternity leave, and is managing the challenges of balancing work and family life. She says...

My little guy just turned 18 months old last weekend; I can't believe how fast he is growing, even I am with him 24/7. Although he was and still is the biggest challenge in my life, I could not ask for anything more precious than the way he is.

According to "The Baby Book by Dr. Sears", certain type of babies are identified as "high-need babies". There are 12 characteristics of high-need babies, such as hyperactive, demanding, wakes and feeds frequently, super-sensitive, can't be put down, unpredictable etc, and, lucky me, mine has all of them.

To be fair, all babies have high needs at certain times in their life. No matter if the child is "high need" or not, the more you interact with your newborn right from the start, the better you understand the way he/she is and the better you cope with the unpredictable situations. The same principal applies to everything in our lives, including financial planning, especially after a new addition to the family.

When I first received the information package from the hospital, several benefits caught my eye and I started to research what tax incentives and government programs are available for families with children.

The Universal Child Care Benefit, the Child Tax Benefit, the Child Tax Credit, Child care expenses and the Children's fitness tax credit are the regular tax credits and benefits that most of the qualified families can take advantage of.

After your baby is born, the parents are entitled to receive the $100 Universal Child Care Benefit (UCCB) per month for each child under age six. This is not an income-tested benefit. The benefit is intended to help pay for the cost of daycare for younger children. However, even your child does not go to daycare, you still can receive the UCCB. UCCB payments are taxable in the hands of the lower-income spouse.

With the recent federal budget, the Government of Canada is proposing to make some changes to this benefit. The Government proposes to improve the taxation of the UCCB to ensure that single-parent families receive comparable tax treatment to that received by two-parent families by allowing the UCCB to be taxed in the hands of an eligible dependent. This change will provide up to $168 in tax relief for single parents with one child under the age of six.

The Canada Child Tax Benefit (CCTB) is a non-taxable amount paid monthly to help eligible families with the cost of raising children under 18 years of age. The CCTB may be topped up with the Child Disability Benefit (CDB), a monthly benefit providing financial assistance for qualified families caring for children with severe and prolonged mental or physical impairments and the National Child Benefit Supplement (NCBS), a monthly benefit for low-income families with children. Those benefits are income-tested payments.

Even if you are unsure about whether you qualify for the CCTB because your family net income is too high, you should still apply. They calculate your entitlement every July based on your family net income for the previous year. If your income fluctuates you may become eligible for the CCTB in a future year.

The Province of BC funds the BC Family Bonus program, which provides tax-free monthly payments to support low- and moderate-income families with children under age 18. There is no need to apply separately to qualify under these programs. The CRA will use the information from your Canada Child Benefits application to determine your eligibility for these programs. If you are eligible, the amount of any payments will be calculated automatically based on information from the income tax returns filed by you and your spouse or common-law partner.

These benefits can directed into an "in trust" bank account for your child so that interests earned on these amounts will be taxed in your child's hands and will not be attributed back to you. Later on, you may invest the funds on your children's behalf in a Registered Education Savings Plan (RESP) or an In Trust For account.

RESPs allow you to invest for your child's future education in a tax-deferred environment. Additionally, the federal government will provide a direct Canada Education Savings Grant (CESG) to the RESP that will match 20% of the first $2,500 of annual contributions that you make into the RESP in a year (with a enhanced rates on the first $500 of contributions of lower and middle income families). The grant will be worth up to $500 per year for each year your child is under 18, to a maximum of $7,200 per beneficiary.

For children born in 1992 or later, you can claim a non-refundable Child Tax Credit of $2,089 for each of your children who are under 18 at the end of the year. Only one parent can claim the credit. You can claim the full amount of the credit in the year of child's birth, death or adoption. Any unused credit amount can be transferred between spouses.

The amount of child care expenses that you can claim is subject to various limits, depending on the age of the child and whether the child has a disability. Basically for child under age seven you can claim up to $7,000. From ages seven to 16 the allowable deduction is $4,000. If the child is over 16 and infirm, but is not eligible for disability tax credit, you can claim $4,000. For parents of any child that is eligible that is eligible for disability tax credit, the eligible amount of child care expenses is $10,000, regardless of the age of the child. In addition to those limits, the claimed expenses are also subject to an overall limit of two-thirds of the "earned income" (basically salary and wages) of the lower income spouse.

Under the Children's Fitness Tax Credit, you may be able to claim up to $500 of related expenses paid in the year for children under the age of 16 enrolled in an eligible fitness program. Soccer, hockey, dance lessons and other programs involving significant physical activity are eligible. Children's camps also qualify if they last at least five consecutive days and spend more than 50% of the time in physical activities.

However, there are some limitations to this tax credit. These programs must last at least eight weeks with at least one session per week. You only can claim the fees of program administration, instruction, facility rentals, referees, equipment used in common and supplies, not the costs of travel, meals or accommodation.

Children who are eligible for the disability tax credit can qualify for the children's fitness tax credit up to the age of 18 instead of 16 and an additional $500 non-refundable amount is available as long as the eligible program costs at least $100.

Being a mother is no easy task; however, it will be easier if you do the homework ahead of time. If you didn't have time in advance, I hope that you find the information in this article useful!

The opinions expressed are those of Brad Brain, CFP, R.F.P. CLU, CH.F.C., FCSI. Brad Brain is a Certified Financial Planner with Manulife Securities Incorporated, Member CIPF and with Manulife Securities Insurance Agency in Fort St John, BC. Brad Brain can be reached at or